Chapter 2: Factors of Production

Question 1

Factors of production

Answer 1

The economic resources of land, labour, capital, and enterprise

Question 2

Land

Answer 2

Any natural resource which is used in production eg. raw resources, gas, water, etc

Question 3

Labour

Answer 3

Human effort used in producing goods and services eg. workers, miners, farmers, etc

Question 4

Capital

Answer 4

Human-made goods used in production eg. factories, machines, buildings, etc

Question 5

Enterprise

Answer 5

Risk bearing and key decision making in business eg. business owners

Question 6

Consumer goods

Answer 6

Goods and services purchased by households for their own satisfaction

Question 7

Occupationally mobile

Answer 7

Capable of changing use

Question 8

Geographical mobile

Answer 8

Capable of moving from one location to another location

Question 9

Mobility of land

Answer 9

• Occupationally mobile
  eg. Land used for farming can be used for houses instead, trees can be used to make beds or railways
• Geographically immobile
  eg. Not possible to move a section of land from Sri Lanka to India. However, Some forms of land, in its broader meaning, can be moved to a certain extent. For example, the course of rivers can be diverted and wildlife can be moved.

Question 10

Mobility of labour

Answer 10

Mobility varies.

Some workers may find it difficult to move from one area of the country to another, or from one country to another (geographical immobility), and some may find it difficult to switch from one type of job to another type (occupational immobility).

Question 11

Causes of geographical immobility in labour

Answer 11

• Differences in the price and availability of housing in different areas and countries
• Family ties
• Differences in educational systems in different areas and countries
• Lack of information
• Restrictions on the movement of workers

Question 12

Causes of occupational immobility in labour

Answer 12

• Lack of information
• Lack of appropriate skills and qualifications

Question 13

Mobility of capital

Answer 13

Mobility varies according to the type of capital goods.

Question 14

Mobility of enterprise

Answer 14

The mobility of enterprise depends on the mobility of
entrepreneurs.

Enterprise is the most mobile factor of production. The skills involved in being an entrepreneur can be applied in every industry.

Question 15

Quantity

Answer 15

Amount

Question 16

Quality

Answer 16

Degree of excellence

Question 17

Quantity of land

Answer 17

The amount of physical land in existence does not change much with time. Other natural resources, however, can change quite significantly. Rainforests are currently declining at a rapid rate. Some natural resources are renewable whilst others are non-renewable.

Question 18

Quality of land

Answer 18

Fertilizers can be applied to fields to increase the fertility of the land. The purity of rivers, and so the health of fish in the rivers, can be improved by stopping firms from polluting the rivers. Providing good drainage can increase the yield of fruit trees.

Question 19

Quantity of labour

Answer 19

The quantity of labour is influenced by two key factors. One is the number of workers available and the second is the number of hours for which they work.

The number of available workers is determined by:
- Size of population
- Age structure of the population
- Retirement age
- School leaving age
- Attitude toward working women

The number of hours which people work is influenced by:
- Length of the average working day
- Whether they work full-time
- Duration of overtime
- Length of holidays taken by workers
- Amount of time lost to sickness

Question 20

Quality of labour

Answer 20

The quality of labour can be improved as a result of better education, better training, more experience, and better healthcare. A healthier labour force will be able to concentrate more, be stronger for any manual tasks and will have fewer days off sick.

Question 21

Quantity of capital

Answer 21

The quantity of capital is influenced by investment and tends to increase with time.

Question 22

Gross investment

Answer 22

The total value of the output of capital goods produced.

Question 23

Depreciation/capital consumption

Answer 23

The value of replacement capital.

Question 24

Net investment

Answer 24

The value of the extra capital goods made. It is equal to gross investment minus depreciation.

Question 25

Quality of capital

Answer 25

Advances in technology enable capital goods to produce higher output and a better quality output.

Question 26

Quantity of enterprise

Answer 26

The quantity of enterprise will increase if there are more entrepreneurs. A good education system, including university degree courses in economics and business studies, may help to develop entrepreneurs in an economy. Lower taxes on firms’ profits (corporate taxes) and a reduction in government regulations may encourage more people to set up their own businesses.

Question 27

Quality of enterprise

Answer 27

Improved if entrepreneurs receive better education, better training, better healthcare, and gain more experience.

Question 28

Payment of labour

Answer 28

Wages

Question 29

Payment of enterprise

Answer 29

Profit

Question 30

Payment of land

Answer 30

Rent

Question 31

Payment of capital

Answer 31

Interest